Jonathan: Generator Spending Can Revive Power Sector
15 October 2010
President Goodluck Jonathan has lamented that the huge expenditure of $13 billion on importating and fuelling generators is more than the $10 billion investment needed annually to achieve stable power supply in the country.
Jonathan described it as an "unwise expenditure" to continue along that line. He canvassed a steady investment for the proper development of the generation, transmission, and distribution capacities as a way of curbing the over 40% increase in cost of goods and services occasioned by the importation of generators due to unstable power supply.
The president stated this at the opening of a power reform forum in Abuja where he promised to open the power horizon and make it attractive for investors while protecting the interest of all stakeholders. He stressed the need for every measure possible to be taken to ensure reliable power supply in the shortest possible time and regretted that even at this stage of global development, most Nigerians were still without power.
He said from next year, the Federal Government would no longer invest in electricity generation, a move that indicates its determination to liberalise the industry in order to boost private sector participation.
Consequently, N900 million has been appropriated to take care of severance packages of Power Holding Company of Nigeria (PHCN) workers while some N57 billion has already been spent on salary arrears.
Jonathan explained that government had realised that throwing money that could have been expended on other critical sectors such as education is not the solution to achieving sustained and frequent power supply. It is therefore moving steadily towards reforming the sector in such a way that it would be "fair" and there would be "no losers".
"Next year, government will cease investment in power," Jonathan told the audience comprising local and international investors, National Assembly members, the diplomatic corps and a few governors. "It is also working to achieve uninterrupted power supply in the shortest possible time," he said.
He went on to state that government was "determined to make the reform fair. In this reform, there will be no losers... we have realised that throwing in government money that could have been spent on education and other sectors cannot be the solution. This administration is determined to implement reform that will make Nigerians proud".
Jonathan argued that the amount of money required to generate electricity over the years is staggering. "The best approach to tackle the situation is to provide an attractive regime for the private sector. In that regard, Nigeria is ready for business," he said.
Government also intends to put flared gas into use. Nigeria is offering incentives to investors who wish to put their money in the gas sector, he told the audience.
In his speech, Special Adviser to the President on Power, Prof. Barth Nnaji, stated that the N900 million that had been appropriated for severance packages upon privatisation and the N57 billion spent on salary arrears for PHCN staff would help in achieving the desired goal.
"Part of the incentives that will encourage private sector participation are a World Bank partial risk guarantee backed by the government and the issue of a Federal Government bond," he explained.
Speaking on attempts by Labour to stall privatisation, Technical Adviser, Regulatory and Transactions Monitoring Unit of the Presidential Task Force on Power, Mr. Rumundaka Wonodi, said the process would benefit everyone in the long run.
"It costs between N40 to N50 to provide a unit of power presently. Government is trying to remove the obstacles that will bring in investors so that the cost of power will be cheaper and the economy will grow... Fears are misplaced. People will not pay for what they do not see. The tariff is reflective. You will only pay for what you see," he argued.
Minister of Finance Olusegun Aganga said the country required $3.5 billion annually for power generation over the next decade. "Some 40,000 megawatts will also be needed to achieve Vision 20:2020," he added. He pointed out that a credit enhancement to the bulk purchaser of power, a letter of credit backed by the Federal Government and a worldwide commercial risk guarantee issued by a multilateral or commercial institution, were different options that would be available to investors.
"The government wants to ensure that investors can put in money, knowing there will be a return on investment, he said. A N300 billion fund established by the Central Bank of Nigeria (CBN) is part of steps that are being taken to successfully implement the power roadmap," he added.
CBN Governor Sanusi Lamido said the apex bank would provide the necessary assistance particularly in the area of interest subsidy. He noted that some N2 trillion in pension funds could be useful. (This Day, Lagos)
